The insured is a body shop, who happens to be repairing a customer auto. While having the care, custody and control of a client's car, an employee collided the car with a wall through carelessness and negligence.

  • The body shop has a Commercial Auto Policy CA 00 01 , which has the CA 99 37 form Garagekeepers Coverage endorsement and the repair shop did not choose Direct Primary nor Direct Excess.
  • The customer's carries a PAP on his auto.

Questions:

  1. Does the Other Insurance condition under the CA 00 01 will applied to this situation?
  2. Will the Garage keeper's policy only cover on an excess basis over the customer's PAP policy even though the Body shop was at fault?
  3. Can the Insurance Company from PAP policy retain their subrogation right against the Body Shop?
  4. Will the Garagekeeper cover and pay this subrogation even when the policy is in excess?

The other insurance clause in the Business Auto Policy states that the insurance company will pay on an excess basis for non-owned autos. Here is the specific policy language:

B. General Conditions

5. Other Insurance

a. For any covered "auto" you own, this Coverage Form provides primary insurance. For any covered "auto" you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance. However, while a covered "auto" which is a "trailer" is connected to another vehicle, the Covered Autos Liability Coverage this Coverage Form provides for the "trailer" is:

(1) Excess while it is connected to a motor vehicle you do not own; or

(2) Primary while it is connected to a covered "auto" you own. b. For Hired Auto Physical Damage Coverage, any covered "auto" you lease, hire, rent or borrow is deemed to be a covered "auto" you own. However, any "auto" that is leased, hired, rented or borrowed with a driver is not a covered "auto".

c. Regardless of the provisions of Paragraph a. above, this Coverage Form's Covered Autos Liability Coverage is primary for any liability assumed under an "insured contract".

d. When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis.

Puerto Rico Subscriber

In response to your questions:

  1. Does the Other Insurance condition under the CA 00 01 will apply to this situation?
  2. Will the Garage keeper's policy only cover on an excess basis over the customer's PAP policy even though the Body shop was at fault?

The business auto coverage is designed to provide coverage for vehicles used or owned by the insured, as designated by the symbols. The liability section applies to covered autos only, none of which would be the customer's vehicle. Damage to property in the insured's care, custody or control is excluded. Therefore, the other insurance clause would not be applicable in your situation, even though it discusses vehicles the insured does not own. Under the business auto policy we always have to look at the symbols as the starting point for coverage.

This brings us to the Garagekeepers form. First, the schedule indicates whether the coverage is primary or secondary over other coverage. Even as excess coverage however, the form is primary for any legal liability. While we are not attorneys and can't make declarations as to legal liability, it appears the garage would be legally liable so the garagekeepers form would be primary. In fact, there is no other coverage that would apply to the legal liability of the garage, since it isn't covered under either the business auto or the personal auto.

3.  Can the Insurance Company from PAP policy retain their subrogation right against the Body Shop?

The personal auto policy states that if the person driving the vehicle was driving under the belief that he was entitled to do so then subrogation rights don't apply. Since the mechanic had the insured's permission to drive the vehicle, the carrier would not be able to go against the mechanic for payment of the loss the carrier paid out.

4.  Will the Garage Keeper cover and paid this subrogation even when the policy is in excess?

If I am understanding this question accurately, you are asking whether the garagekeepers coverage will pay out if the personal auto insurance company subrogates?

If the PAP pays for the loss first, and then the garagekeepers coverage pays the insured for the loss as well, then the insured cannot receive duplicate payments for the same loss. Policy language does not address such a situation, but since the personal auto carrier can't subrogate the loss, then it is our thought that the last carrier to pay would have to recoup the funds from the insured. Really, the two carriers would just need to work out the best way to handle this type of situation.